Whole Foods offers up savings as Amazon deal closes

Amazon.com Inc. marked its first day as owner of upscale grocer Whole Foods Market Inc. by cutting prices on a number of organic goods at locations across Canada and the United States, a first salvo in a battle observers believe could alter the grocery industry’s competitive landscape.

Organic avocados were selling for $1.99 each at Whole Foods’ Yorkville location in Toronto on Monday, a 76-cent price-cut. Lean pasture-raised ground beef had been reduced to $5.99 per pound, from $8.57. And the price of responsibly farmed Atlantic salmon had been slashed to $5.99 per 170 grams from $7.99.

The price tags of those products and some others sported the logos of Austin, Texas-based Whole Foods and Seattle, Wash.- based Amazon, which announced their coupling in June.

“Generally speaking, I think it was a very, very good day for both Amazon and Whole Foods,” said Sylvain Charlebois, a professor who researches food distribution and policy at Dalhousie University in Halifax. “It is clearly sending a statement to the entire food market in North America.”

There are only 13 Whole Foods stores in Canada, mostly in and around Toronto and Vancouver, in addition to more than 400 locations in the U.S.

But Amazon’s US$13.7 billion acquisition of the upscale supermarket chain, a transaction that closed on Monday, has jolted competitors.

Morgan Stanley said Sunday in a research note that they believe lower Whole Foods (WFM) prices could increase the company’s market share, as their most recent AlphaWise survey found approximately seven out of 10 people who don’t shop at the chain said price was the chief obstacle.

“We see lower pricing leading to accelerating WFM share gains,” wrote the analysts. “In essence, we believe WFM prices are 5 per cent higher than competitors (excluding Proteins) and think (Amazon) has the ability to close that gap.”

In Canada, Amazon’s entry into the market comes at a time of already heightened competition.

Grocers in Alberta and Ontario are facing minimum wage hikes over the coming years, which companies have said will increase their costs substantially.